In this installment of our Workplace Strategies Watercooler 2025 podcast series, shareholders Lauren Hicks (Indianapolis/Atlanta), Chris Near (Columbia), and Jay Patton (Birmingham), provide updates about the Office of Federal Contract Compliance Programs (OFCCP) under the new administration, as well as recent matters of interest to federal contractors. Jay offers listeners an update on the shortened EEO-1 filing cycle, along with anticipated changes for reporting on non-binary employees, as well as a reminder about continuing obligations for protected veterans and individuals with disabilities. Lauren provides insights on changes to OFCCP's headcount and structure, the agency's possible enforcement initiatives, and certification issues under Executive Order (EO) 14173. Chris offers a brief mention of the new EO 14281's aim to deprioritize disparate impact, along with a reminder to contractors about the unwinding of EO 11246 obligations pursuant to EO 14173.
Transcript
Announcer: Welcome to the Ogletree Deakins Podcast, where we provide listeners with brief discussions about important workplace legal issues. Our podcasts are for informational purposes only and should not be construed as legal advice. You can subscribe through your favorite podcast service. Please consider rating this podcast so we can get your feedback and improve our programs. Please enjoy the podcast.
Lauren Hicks: This is Lauren Hicks, a shareholder in Ogletree's Indianapolis office. I'm joined today by my colleague Scott Kelly, a shareholder in the Birmingham office, and we are members of the OFCCP Compliance Government Contracting and Reporting Group. This is to provide an update to federal contractors regarding the current status with OFCCP, which, Scott, has been in a tremendous state of flux since President Trump's inauguration.
Scott Kelly: I think that's probably the understatement of
the week, and it seems like the last two weeks have been quite busy
for a lot of different people, but federal contractors were
certainly caught in a lot of this uncertainty when he issued
Executive Order 14173, the Ending Illegal Discrimination and
Restoring Merit-Based Opportunities executive order that
immediately revoked Executive Order 11246, which all federal
contractors know is the laws requiring federal contractors and
subcontractors to take affirmative action and non-discrimination
obligations for women and minorities.
Now, in that executive order, the 14173, President Trump is giving
federal contractors and subcontractors 90 days to continue to
comply with, I think the quote was the regulatory scheme of
Executive Order 11246. My calculation is that's 90 days from
the date of the order, so gut check me on this, I've seen it a
couple different days, and I think this day is very important,
because you don't want to have any of your 11246 in place one
day too late, but I have it as April 21st. Did I do my math right
there?
Lauren Hicks: I think your math is right. It certainly would not hurt to have it all unwound maybe by April 20th, since it is elective to continue the compliance, and some of the untangling will be required.
Scott Kelly: I know that there is the elective or voluntary
compliance until then. I'm reading that as a little bit more of
get it all unwound by April 21st, not necessarily continue in
earnest with some of the things that you were doing, but every
organization might have a different approach to that.
As far as getting it all unwound, it is not an easy lift in my
mind. I feel like I was describing it as 11246 has a lot of
tentacles that wrap around organizations. They're pretty
embedded in systems and processes and a whole host of things. What
types of things do people need to be thinking about, Lauren, as
they unwind 11246?
Lauren Hicks: I think you're absolutely right, Scott. I
think the intention behind the 90 days is to ensure that an
employer is not breaking the law a couple days after this executive
order, because to your point, the tentacles of 11246 are relatively
broad and really built into a lot of systems. So, for instance,
contractors may have to consider removing references to the
executive order and its regulations in statements, policies, some
forms, notices, and other documents.
They are certainly going to have to update their postings, your
career website, possibly the way you do self-identification,
especially for applicants, which is a little bit of a separate
issue from incumbent employees. Incumbent employees are different
because the EEO-1 reporting requires self-identification, just like
11246 did. However, applicants do not fall within the scope of that
EEO-1 report, and so there's very much an individualized
assessment that will need to occur regarding how to move forward
with applicant self-IDs.
I don't think we said at the beginning of this podcast, which
is kind of a flow-over from a prior podcast, that 11246 being
revoked did not impact requirements related to protected veterans
or individuals with disabilities. So, all of these requirements
that we are discussing here with the unwinding exclude those
classes. The compliance obligations for those two remain in effect
as they were prior, and you still have to continue with those
self-ID obligations for those particular classes.
But there will be considerable impact on the talent acquisition
process, the way maybe recruiting functions work, or do outreach
and assess certain things, and then a contractor might have
affirmative action language in various policies, their tagline
might need to be revised in a variety of ways. The tagline is
something that goes on job postings that says something to the
effect of we're an equal opportunity employer, and it might
have affirmative action employer in there as well electively, a lot
of employers did that, and it may have a number of protected
classes listed out that employers may want to revisit in light of
the changes made by this administration.
Then, Scott, the other substantial change that will occur is there
is a flow-down clause. Again, there's one for each of 11246
VEVRAA and 503. VEVRAA and 503 are unimpacted by the new executive
order, but the flow-down for 11246, we anticipate getting language
changes from the government. Then, of course, contractors
themselves will have to make adjustments within their clauses with
their subcontractors, vendors, suppliers, et cetera.
Scott Kelly: So, it sounds like lots to do before April 21. I
guess we also need to be considering the state affirmative action
and reporting obligations that are out there. I know the last time
I looked at this, and this by no means is an exhaustive list, but I
believe Arizona, California, Connecticut, Illinois, Iowa, Kentucky,
Maine, Maryland, Massachusetts, Minnesota, New Jersey, New York,
Ohio, Pennsylvania, Rhode Island and Wisconsin all have on their
books state affirmative action requirements.
I think some of those pertain to only doing business with
construction business with the government, so I mean, this by no
means is a one-size-fits-all type of approach, but I think it's
not a real hard prediction to make is that we're going to see
maybe where the federal government is not acting on affirmative
action. We might see these states that already have laws on the
books start enforcing them more vigorously, and then would you be
surprised if we saw some other states that I didn't read out
get into the fray here?
Lauren Hicks: I would call that an inevitability, and I will also note that some of the states may have to reassess their programs, because a lot of them are built on the foundation of 11246.
Scott Kelly: Yeah, absolutely. So that's another thing we
will be keeping our eyes on for you all, and look for updates
either on our insight page on ogletree.com or, perhaps, when we see
some of those updates, we'll record podcasts like this in the
future to address some of the changes that might be coming out of
different states.
We heard from the Acting Secretary of Labor—I believe it was
a week ago. He issued an order. What did that order say, and what
has happened since then, Lauren? Catch us up.
Lauren Hicks: The order came out and ordered OFCCP to cease and
desist all Executive Order 11246-related enforcement, and OFCCP was
required to issue notices of the closure of 11246 portions of its
audits and investigations no later than January 31st, which was a
couple of days ago. Then, also to note that the Section 503 and
VEVRAA enforcement is currently held in abeyance. Lots of questions
on what that means. It just means on hold, and we don't know
for what period of time, Scott.
But the letters did go out on Friday to the employers, and it
simply reads, "the United States Department of Labor's
Office of Federal Contract Compliance Programs, OFCCP, recently
scheduled a compliance evaluation at your establishment," and
then it will cite the address. On January 21st, 2025, President
Donald J. Trump issued an executive order entitled Ending Illegal
Discrimination and Restoring Merit-Based Opportunity that revoked
Executive Order 11246. Due to this revocation, the Executive Order
11246 component of this review has been closed by OFCCP. The 503
and VEVRAA components of the review are being held in abeyance
until further notice.
Something that I found kind of curious and interesting is that that
same notice was sent even for complaint investigations that were
under either 503 or VEVRAA or both, but did not have a 11246
component, but it just sort of noted that they too are held in
abeyance. Otherwise, Scott, the agency has gone out of its way to
note that the 503 and VEVRAA compliance obligations remain in
effect. Those are not in abeyance—is that right?
Scott Kelly: Yeah, Lauren, that's right. Section 503 and
VEVRAA obligations do remain in effect. That would mean that the
annual affirmative action requirements under both of those programs
are still in effect. In addition to that, you've got the
analysis that's required under the individuals with
disabilities AAP, but you've got outreach and recruitment
responsibilities and obligations to comply with; you've got
record-keeping obligations to comply with for veterans and
individuals with disabilities. There's a job listing, some
people call it posting, but it's really a job listing
requirement that is under VEVRAA that you're going to need to
comply with. So, still a lot to do for those in the federal
contracting compliance world that have these covered contracts with
VEVRAA and individuals with disability obligations.
I would say that because a lot of the things we see in the new
executive order from President Trump, the ending illegal
discrimination executive order creates, I see some new obligations
for federal contractors and for grant recipients. The good news for
all is that it doesn't seem like for some of those
requirements, there's going to be a contract threshold that you
need to be worried about. We've all been worried about whether
some of these regs, 11246 regs, or even VEVRAA and 503 regs have
applied to your organization, but I do think for these AAP
requirements, keep in mind the threshold. We've got the $50,000
contract threshold for Section 503 compliance, and then you've
got a higher threshold of $150,000 for VEVRAA. That might be
something that all federal contractors could consider taking a look
at as they're figuring out what obligations they have moving
forward.
So, what's going to happen to OFCCP, Lauren? Do you have any
forecasting or crystal balling that you can do for us there?
Lauren Hicks: I certainly wish I had more information about what
happens with OFCCP, there's a lot of unknown at the moment. I
used to work for the agency myself, and it's an organization
that I know has been thrown into a lot of chaos in the last couple
of weeks, but they do now have a new acting director, Scott, who is
also now the deputy director of policy. His name is Michael
Schloss.
A little bit of background on him. Just that his background seems
to be more as a benefits lawyer. Doesn't seemingly, at least at
what's publicly available, have a lot of experience with the
OFCCP space or federal contractor compliance, but he's only
been in this position for a few days and so we don't know what
comes next. Will the agency issue new guidance under the executive
order? We would expect there to be some regulations that would roll
out, but we also expect guidance on a number of things that are
really unknown right now.
For example, will OFCCP even continue to engage their VEVRAA and
503 audits? Seemingly yes, but as we noted, they are in abeyance at
the moment, and we don't know when those will resume. Will they
be making revisions to the compliance evaluation scheduling letter?
Certainly, they will have to remove the 11246 portions, and then
there's some other informal guidance we might expect, right? We
don't know what happens with OFCCP's contractor portal,
which, generally speaking, we would have expected a required
certification around the end of June or early July 2025, but we do
not know if that will be required again this year. Or if OFCCP is
continuing audits, will they continue working their way down the
most recent sessile?
So, there's a lot we don't know. Certainly, they could,
Scott, pivot and return to what we might call very focused reviews,
right? They could either continue doing the two components together
of for veterans and individuals with disabilities just like in a
normal audit that would have also contained 11246, or they might
pivot as they did in the first Trump administration and separate
those out and do what they would call focused reviews, right? So,
your audit would have only one law that they would investigate at a
pretty deep level, and that could be either a 503-specific or a
veteran-specific investigation.
So, we don't know yet what's coming with that. I know
there's some talk, Scott, that maybe the agency could be used
for other political purposes that are more in alignment with this
administration. What do you think about that?
Scott Kelly: Well, I think we could look to past practice
perhaps as a potential clue, and there was an executive order
issued by President Trump in his first term near the very end. In
September of 2020, he issued a divisive concepts executive order
about race and sex stereotyping, and as part of that, directed
OFCCP to set up a hotline for employees and stakeholders anywhere
to call and report on federal contractors that were violating the
executive order.
Now, that executive order, for the record, did get preliminarily
enjoined by a California federal district court between the I think
... I don't want to quote the exact day, but it was towards the
end of December of 2020. So, a lot of the hotlines, and I don't
know if they did receive complaints, what came of those, or what
went with them. I believe that the director at the time also sent a
couple of large employers some letters inquiring about some of the
DEI practices that those employers had engaged in.
I would suggest that that would not be too far afield to predict
that if the agency continues, that it might be a mechanism or a
place to receive such complaints and to help monitor the practices
of federal contractors and subcontractors to ensure that they
aren't engaging in any type of DEI programming that would
violate the anti-discrimination statutes. I mean, that's part
of President Trump's new executive order on ending illegal
discrimination, where federal contractors and subcontractors are
going to have to affirmatively certify that they don't engage
in any such programming. So, it'll be interesting.
It'll also be interesting to see if the agency continues to use
as part of one of its, I always called it one of its enforcement
sticks, was its broad use of media and the press when it was
announcing either lawsuits or settlements with contractors, and how
that might be used as part of the efforts that it's no secret
this administration is not a fan of DEI and the "anti-woke
agenda." So, it'll be interesting to see, and I guess just
more time will have to pass.
So, I know you and I are going to be watching this, as we have for
the last two weeks, with open eyes and trying to find any little
bit of nuggets of information out there that we can. So, we'll
keep doing that and pass that along to our listeners, so we hope
that we'll have more information to share with you very soon.
Thank you all very much.
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